Sep 21, 2020

Axios Generate

Ben Geman

Good morning. Today's Smart Brevity count: 1,269 words, 5 minutes.

Situational awareness: "Royal Dutch Shell is looking to slash up to 40% off the cost of producing oil and gas in a major drive to save cash so it can overhaul its business and focus more on renewable energy and power markets." (Reuters)

And we're just past the 35th anniversary of Kate Bush's album "Hounds of Love," so her unique sound opens today's edition...

1 big thing: The climate stakes of the SCOTUS fight

Illustration: Aïda Amer/Axios

Ruth Bader Ginsburg's death and the battle over her vacant Supreme Court seat have real implications for energy and climate policy.

Why it matters: If President Trump replaces her, the court will likely become more skeptical of regulations that claim expansive federal power to regulate carbon under existing law, and perhaps new climate statutes as well.

  • If Joe Biden wins the election, that expanded conservative majority on the court could create more legal jeopardy for his promised initiatives to strengthen emissions regulations and create new major ones.
  • "[A] Biden Administration could find it harder to demonstrate that it had a 'reasoned explanation' for rewriting final, Trump-era rules," ClearView Energy Partners said in a weekend note.
  • If Trump wins again, it could strengthen his hand in defending his moves to scrap or weaken Obama-era policies.

The big picture: SCOTUS already blessed federal regulation of greenhouses gases in a 2007 decision, but how much running room it gives agencies is another question entirely.

A huge thing in regulatory litigation is how justices interpret the 1984 high court ruling in Chevron v. Natural Resources Defense Council. It gives agencies leeway to interpret statutes that are vague or silent on a topic.

What they're saying: "Already, the Court has been taking a narrower view of Chevron — finding that it applies in fewer and fewer instances, so the principle of deference to agency expertise seems to apply to a smaller scope of cases," said Harvard Law professor Jody Freeman.

"So, this was already the direction, and a Biden administration was already going to have to be smart and strategic about regulation," said Freeman, who worked in Obama's first-term White House.

Yes, but: "Biden could do a lot on climate change within the EPA’s well-established authority to reduce greenhouse gases," Freeman said, adding, "There is plenty of room to make substantial progress using executive power, while controlling legal risk."

Our thought bubble: There's an even bigger potential spillover effect from the fight over the vacant seat.

  • Imagine Trump loses and Democrats also take the Senate, but the current GOP Senate majority confirms his SCOTUS pick this year.
  • If that happens, the odds grow that Democrats would scrap filibuster rules next year to make it easier to implement their agenda.
  • That, in turn, greatly increases the odds of passing big climate and energy legislation, which faces immense hurdles with the 60-vote threshold intact.

The intrigue: Per ClearView, ending the filibuster would have multiple spillover effects.

  • "[T]he legislative filibuster does not merely shelter the fossil energy status quo by raising the bar for passage."
  • "It also gives a 41-Senator minority the power to threaten a government shutdown (i.e., by blocking funding packages) as a check against Executive Branch decisions. That check would disappear."
2. The long road to a decarbonized grid
Data: Deloitte; Chart: Axios Visuals

A Deloitte analysis out this morning explores why splashy power company pledges to cut emissions to zero by midcentury are going to be very hard to achieve, but hardly impossible.

Why it matters: Electricity is the second-largest source of U.S. greenhouse gas emissions after transportation.

  • Over the last two years, some of the country's biggest power companies pledged to fully decarbonize their generation over the next few decades.
  • Per Deloitte, 22 investor-owned power companies have goals to be "net zero" or have 100% carbon-free generation by 2050.

The big picture: "There are significant gaps between decarbonization targets and the scheduled fossil fuel capacity retirements and renewable additions, and flexibility requirements needed to achieve full decarbonization," the Deloitte study states.

"The math doesn’t yet add up," it adds

What's next: The firm's "utility decarbonization framework" is broken into three decadelong phases that offer a sequential way to close the "transition gap."

  • The next 10 years see more coal-plant retirements and renewables and storage deployment and innovation, and some carbon capture.
  • Subsequent phases address expanding "smart" homes and "grid interactive" tech in buildings; development of seasonal-scale storage; EV-grid interaction, direct air capture and other approaches.

Yes, but: A suite of circumstances will have to line up right. The report, for instance, details various deployment obstacles around costs, complexity, and development of not-yet-mature tech.

The many examples address policy (such as delays and "uncoordinated transmission development" for offshore wind), "mixed" social acceptance for technologies like "smart" homes, and much more.

Go deeper: The 5 Biggest US Utilities Committing to Zero Carbon Emissions by 2050 (Greentech Media)

3. Big this week: Tesla and VW

Tomorrow brings Tesla's "battery day," where the electric automaker is promising to unveil new breakthroughs.

Why it matters: "[W]e expect the event to be potentially narrative changing for Tesla and the battery market," Morgan Stanley analyst Adam Jonas (a Tesla optimist) said in a note.

The big picture: Via CNBC, "Elon Musk’s electric car company is likely to disclose specifications for at least one new type of battery cell that the company has been developing, and may give an aspiring start-date for manufacturing its own cells at scale, too."

What's next: Wednesday brings the reveal of the ID4, an electric SUV from Volkswagen, which is on track to become the world's largest EV manufacturer by 2028, predicts Wood Mackenzie.

Go deeper: 3 things to know about Tesla’s ‘battery day’ (MarketWatch)

4. Walmart's new climate plan

Walmart said Monday that it's aiming to have zero greenhouse gas emissions across its global operations by 2040.

Why it matters: It is the latest corporate giant to make an aggressive long-term pledge, and Walmart says it'll do it without offsets — that is, paying for climate-friendly projects elsewhere while continuing its own emissions.

How it works: The plans include having renewables supply all their global facilities by 2035 and "electrifying and zeroing out emissions from all of its vehicles, including long-haul trucks, by 2040."

  • Another part involves using "low-impact refrigerants" and electric heating for all its "stores, clubs, and data and distribution centers" within 20 years.
  • Separately, Walmart says it will help to "protect, manage or restore " 50 million acres of land and 1 million square miles of ocean by 2030.

Yes, but: Bloomberg provides some important context...

  • "Walmart is committing to cutting emissions from its own operations, known as Scope 1 and 2. Though not an easy task, the target will zero out merely 5% of its total emissions."
  • "The retailing giant has put in some efforts through so-called Project Gigaton to address Scope 3 emissions, which are generated by its suppliers and customers, but the company has yet to set a net-zero target across all scopes."
5. Nikola exec chairman steps aside amid tumult

Nikola Corp. executive chairman Trevor Milton is out as the electric and fuel cell truck startup reportedly faces federal inquiries into a short-seller's allegations of inaccurate or misleading statements.

Driving the news: Nikola announced early Monday that Milton, who is also Nikola's founder, approached the board and proposed stepping aside.

  • Milton, in a statement, said "the focus should be on the Company and its world-changing mission, not me."
  • Stephen Girsky, a former General Motors executive already on Nikola's board, is taking over as board chairman immediately.
  • Nikola's stock is down roughly 26% in premarket trading.

Why it matters: It's the latest move in a head-spinning series of events for Nikola.

  • Its value soared after going public in June, and this month GM took an 11% stake and agreed to build its planned Badger pickup and supply tech for that vehicle and planned semi-trucks.
  • Just days later, Hindenburg Research, which is short Nikola, issued a scathing report calling it an "intricate fraud" based on "lies" by Milton. He has disputed the claims.
  • The Securities and Exchange Commission and the U.S. Attorney’s Office for the Southern District of New York are both looking into the claims, per multiple reports.

Go deeper: GM's eyes are wide open on Nikola partnership

6. ICYMI: Climate change and tech

Photo illustration: Aïda Amer/Axios. Photo: Jit Chattopadhyay/Pacific Press/LightRocket/Getty Images.

Over the weekend, subscribers of Mike Allen's Axios AM newsletter received our "deep dive" on climate change — coverage helmed by Axios' Amy Harder, who explored big tech's evolving efforts on the topic.

You can read it here.

Ben Geman